Bladder cancer product trial attracts attention

Since listing on Australia’s stock exchange in early February, shares in diversified biopharmaceutical company
Bioniche Life Sciences
have shed nearly half their value.

But with a world-first animal vaccine for E. coli now on the market and trials for a human bladder cancer treatment looking positive, it could be timely to look more closely at its growth prospects.

Originally an animal health products business funded by about 100 veterinarians acting as “angel" investors, Bioniche has expanded to a $C80 million company with human health, animal health and food safety divisions.

When Canadian urologist Alvaro Morales hit on a possible link between Bioniche products supplied at his local vet and his research into bladder cancer treatment, the company turned its focus to developing Urocidin.

The technology, used for non muscle-invasive human bladder cancer, has shown promising results in tests, leaving almost 30 per cent of otherwise terminal patients cancer-free after treatment.

Related Quotes

Company Profile

Bioniche’s chief executive officer Graeme McRae says it is the only product of its type he knows of which is in development and provides an alternative to traditional chemotherapy treatment.

A $US130 million licence agreement signed with American company Endo Pharmaceuticals gives Endo the rights to sell Urocidin globally, pending approval from the US Food and Drug Administration.

While the agreement does not provide for any royalties to be paid by Endo, Bioniche retains all manufacturing rights, producing the drug from its facilities in Canada. Just under half of the $C29 million capital raising completed in Canada and Australia this year will be used to expand manufacturing over the next three years to meet expected demand.

McRae says Endo will pay Bioniche a percentage of the final sales price, which should result in higher revenue than a royalty-based agreement.

Endo is funding and leading the second phase-three tests, with trial patients being recruited now.

The companies expect trial results to be ready for release in 2014, with an application for marketing approval made to the FDA by 2015.

Partially funded by a $C25 million Canadian government loan, the company’s food safety division has developed the first licensed on-farm intervention against the spread of the potentially fatal E. coli O157 bacteria. The vaccine is marketed as Econiche.

On-farm immunisation of cattle is intended to reduce the risk of human exposure to the pathogens transmitted through contaminated meat, produce and water or from direct contact with cattle.

Analysts at brokerage firm Taylor Collison says that if the Canadian government legislates for mass vaccination of cattle as part of a public health plan it could attract a $C45 million order by 2013, with an estimated gross margin of about 87 per cent for the company.

McRae says six multinational companies now account for about 70 per cent of the $20 billion global animal health market, leaving a gap for smaller players.

He previously indicated Bioniche was interested in acquiring small Australian businesses with good products and no significant infrastructure that could be developed independent of the multinational companies.

However, the company last week ended negotiations to acquire Australian animal plasma production business Plasvacc Holdings after due diligence issues could not be resolved. Management is now canvassing alternative target options and intends to use about $C5 million of the $C29 million capital raising to acquire new, externally developed products and technology.

Initially offered earlier this year at $1.45, shares are trading on the ASX at 85¢. But assuming near-term government and private sector sales, Taylor Collison values Econiche at 19¢ a share, the animal health business at 52¢ a share and Urocidin at $1.76 a share.